Coursework - Assignment Example

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Starting April 2016, the 3% supplement for diesel cars will be scrapped (Deloitte, 2012). The other important adjustments that have been made include exclusion of certain security enhancement, which will not be considered henceforth, as accessories when estimating the benefit’s corresponding to the cash value in respect to company cars used for private purpose. These adjustments will be put into force from 6 April 2011 and will be applied retrospectively. Private fuel benefit The benefit’s cash equivalent in respect to free fuel offered to employees will increase because the multiplier used to estimate them will be increased from ?18,800 to ?20,200, a change that took effect from April 2012. Furthermore, this multiplier will further increase by 2 percent above the inflation rate, taking effect from 2013 up to 2014. Capital allowances and lease rental restriction There shall be an extension (up to April 2015) of the time through which 100 percent of capital allowances for the initial year are allowed on car expenses. Nonetheless, starting April 2013, the emissions measurement will drop off from 110g/km to 95g/km; in addition, this measurement will be incorporated into the main pool and charged 18 percent per annum instead of 8 percent special rate pool, which will drop off from 160g/km to 130g/km. In this regards, tax relief extended to employers will be pegged on the lease rentals for cars whose emission exceeds 130 g/km (limited at 15%) (Deloitte, 2012). Vehicle Excise Duty (VED) The VED increase was aligned with the Retail Prices Index (RPI) as of April 2012. However, the Government expressed interest in repealing the calculation of VED over the medium term based on the views gathered from motoring groups (Deloitte, 2012). QUESTION TWO Petrol driven 5 door hatchback, with CO2 emissions of 139g/km Employee benefit from car = ?18,000* 85/100*40/100*18/100 = ?1,101.60 Since the employee is provided with fuel for private use of the company car, this benefit will be taxed. The value to be taxed is pegged on the engine’s fuel efficiency. The percentage charge for this benefit is the same as for the car benefit and, therefore, it will be calculated as follows: . ?20,200*40/100*18/100 = ?1,454.4 The total cost to the manager is ?1,101.60 +?1,454.4 = ?2,556 Although the fuel benefits have attracted some tax, I would urge the manager accept petrol for private motoring, which is provided by his employer because this will lead to some other benefits. These benefits, which are not additionally taxed include insurance, repairs, maintenance and servicing, Membership of a motoring organization, and road tax. Ideally, the cash value of these benefits is more than the car tax paid due to the fuel used for private purpose. As such, the employee will get at least ?600 per annum depending on the reliability of the vehicle. However, if the manager is sure that refusing to take the fueling benefit will not lead to insurance increases, then they can as well opt to do away with the benefit. Cost to the employer Capital allowances Twenty per cent is claimed on the written-down cost every year; therefore, the following capital allowances will be claimed for the year ending 31st March 2013: The car does not fall under low-emission category since it exceeds 110g/km of CO2 and, therefore, the 110 per cent deduction for the first
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Summary

QUESTION ONE The general changes that are proposed to the taxation of company cars, both for the company and for the employees, for the next few tax years. For all the cars emitting over75b/km of carbon dioxide, the Government has increased a one percentage point on top of what was to be charged in 2013 and before, which will be in force from 2010 to 2015 and whose maximum is 35 percent…

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